NON-DISCLOSURE AGREEMENT (NDA)

CS Shirish Bhootra
Aug 15, 2022
3 min read

Written by CS, Shirish Bhootra

Introduction:

One of the various material agreements is the Non-Disclosure Agreement. A Non-Disclosure Agreement is a contract executed for confidential relations between the parties. The party or parties to the agreement mutually agree that the sensitive or material information collected or obtained shall not be disclosed to others. It is also known as a Confidentiality Agreement. These are executed wherein there are negotiations between parties. It allows the parties to share material information without any hesitation that it would be disclosed to others.

Key Factors:

1. It helps the parties in acknowledging confidentiality between them and acts as a firewall that the material information so shared would not be made public.

2. Its area of coverage includes but is not limited to discussions between proposed joint ventures.

3. Non-Disclosure Agreements are of two types: Mutual and Non-Mutual Non-Disclosure Agreements.

4. It protects the interests of the parties involved.

5. Facilitates the ease of sharing information among parties with confidence that material information so shared would not be disclosed to others.

6. Corporates, as of now, demand that the employees in charge of material information have to execute NDA.

7. Material Information includes but is not limited to marketing strategy, sales plan, potential customers, or intellectual property rights.

8. In case of breach of NDA by parties involved, the suffering party may sue another party for monetary loss caused due to such breach.

Types of Non-Disclosure Agreements:

1. Mutual Disclosure Agreement :

It is a type of agreement where one party provides consent to another party to disclose the material information, and on disclosure, no legal action would be initiated.

For example, the patient allows the doctor to share personal information related to the patient with the insurer.

2. Non-Mutual Disclosure Agreement:

In a non-mutual disclosure agreement, there is only one party signing the agreement for non-disclosure of material information.

This agreement is usually executed by employees of the company who are in charge of the material information of the company.

NDA: Essentials

There is no fixed format for NDA. They are customized as per parties to the agreement. However, an NDA must include the following :

The parties to the agreement and their details.
A definition of what constitutes confidential information in the case.
Exceptions where confidentiality would not be applicable.
Disclosure of the relevant use of information.
The period of time.
Miscellaneous provisions to be included.

"Miscellaneous": Other Details

This clause"miscellaneous" discloses other details relevant like laws applicable and fees payable.

Pros and Cons of NDA:

Pros:

Material information or facts remain secret.
Clarity regarding shareable and non-shareable information.
Low cost to create.
Outlines consequences.

Cons:

An atmosphere of mistrust may come into existence.
Risk of deterring top-tier talent from joining the firm.
Can sour the relationship with current employees.

NDA: Real World

Apple is a renowned name in the technology sector. The company guards its technology and prospective products till they are made available to the public. It is done with the motive to secure trade secrets from being stolen from competitors and also to have intellectual property rights (Copyright ).

It focuses on secrecy and therefore asks the partner to sign NDA. It asks the partner not to use the name Apple or disclose the name Apple in any manner and, in case of a breach, has to suffer penal consequences.

NDA: Duration

NDA is customized as per parties and therefore lasts for a different amount of time. Normally it ranges between 1 to 10 years.

NDA: Cost

The cost depends on the complexity involved in framing agreement, and therefore there is no fixed amount for the frame of NDA.

NDA: Violation

Upon violation of NDA, the party suffered may initiate legal action against the other party to the agreement.

Conclusion:

NDA is low-cost-oriented, easy to create with legal binding force along with the assurance that material information of parties would not be public.

While drafting an NDA, all important aspects should be covered along with a clause concerning the shareable and non-shareable information.

References:

Alexandra Twin. (2022). Non-Disclosure Agreement (NDA). retrieved from Non-Disclosure Agreement (NDA) Definition (investopedia.com)
Non Disclosure Agreement. LegalDocs. retrieved from Non-Disclosure Agreement: Key Features and Template - LegalDocs